2017 Long Term Energy Plan – Implications for Ontario’s distribution sector

On October 26^th the Ministry of Energy released the much-anticipated 2017 Long-Term Energy Plan (LTEP), which provides projections and broad policy directives for Ontario’s energy future. Among its many implications and promises is the fact that Ontario’s electricity distribution sector will receive greater support from the provincial government as it is increasingly called upon to help Ontario meet energy demands.

The LTEP recognizes, for example, the finding of the Ontario Distribution Sector Review Panel, in 2012, that costs in the distribution sector could be reduced by as much as $1.2 billion over 10 years by consolidating local distribution companies (LDCs). The 2017 LTEP calls on the Ontario Energy Board (OEB) to “lead, innovate, and provide LDCs with incentives to become more cost-effective and efficient.”[1] What these innovations and incentives will look like and the specific ways in which they’re implemented will require further and more concrete direction from the OEB, but the LTEP provides a preliminary idea of the changes that are envisaged for Ontario’s distribution sector.

Modernizing the Grid

In broad terms, the LTEP highlights the province’s need and plan to modernize its distribution grid. Given that the Ontario’s LDCs are the final step in delivering energy to residents, they act as a customer-facing contact point, reflecting the provincial government’s energy policy. To that end, the LTEP seeks to provide greater transparency between LDC and customer and to support customer engagement with his or her energy consumption. “A modern grid is a digital grid”.[2] The LTEP views digitization of the distribution grid, though the use of technology like smart meters, as the key step in its modernization and in providing greater access to information for both LDC and consumer. With more information available and more engagement by the consumer with how and when energy is used, the LTEP predicts cost savings and energy efficiency increases in the distribution sector.

The LTEP also emphasizes that preparing the distribution grid for integration with Distributed Energy Resources (DERs) is another key factor in its modernization. DERs will include new energy storage technologies, micro-grids, and electric vehicles, which are anticipated to eventually help power homes and support the electricity network. In fact, the LTEP devotes significant space to discussing electric vehicles and their integration with the grid, especially with the continuing electrification of the transportation industry. DERs are becoming more affordable and efficient and can be particularly useful in supplying more remote regions of the province with power. The better prepared our distribution grid is for accommodating these resources, the better it will be able to meet Ontarians’ changing energy demands.

Advanced Net Metering

Another important component in bolstering the province’s distribution sector is the increased use of net metering, which is an arrangement with an LDC in which a customer can offset its energy costs with electricity generated by its own renewable energy system by receiving credit for energy sent to the grid. This provides incentive, for example, to install rooftop solar and other renewable energy generation projects on one’s property. The LTEP indicates that the government will expand and enhance net metering by “proposing legislative and regulatory amendments that would allow third-party providers to own and operate net-metered renewable generation systems while ensuring appropriate consumer protection measures are in place.”[3]  

As a push toward innovation, the LTEP states that the government will also propose legislative amendments which allow for the launching of “demonstration projects” for virtual net metering. Virtual net metering allows customers who may not be able to install a renewable energy system at their home to instead pay a portion of the costs for a remote installation and in turn receive credit when it sends energy to the grid. The LTEP indicates that these legislative proposals will be introduced in fall 2017, with the expectation that they would be passed in 2018.[4]

Final Thoughts

The significant discussion of the distribution grid and its promising innovations in the LTEP sends a clear message that the distribution sector will play an increasingly important role in supporting Ontario’s energy health in the coming decade. While the province is currently well-positioned regarding its electricity supply, the LTEP indicates that a gap will begin to emerge between committed supply and demand outlook by 2022, and will grow significantly as nuclear units begin to go offline.[5] A modernized grid which supports innovative technology will allow for better demand management and consumer engagement and will be essential to bridging this gap.